Distributed ledger technologies, like blockchain, are now eyed with potential to overhaul not just payments, but transactions that require data to move along with money. Trade finance has become a central focus for some blockchain innovators, including Microsoft via its Azure platform.
On Tuesday (Sept. 27), the technology conglomerate announced a significant step towards developing blockchain-based trade finance solutions via a partnership with Bank of America Merrill Lynch (BAML).
Announcing their collaboration at the Sibos FinServ conference, Microsoft and BAML said they would co-build and test technology, develop frameworks and explore best practices for using blockchain technology for trade finance transactions. Microsoft Treasury will advise on initial tests for first clients of the tool, the firms said, which will run on the Azure platform.
Together, the firms said they plan to complete the first transaction on Azure powered by blockchain between a treasury and a major financial institution.
“By working with Bank of America Merrill Lynch on cloud-based blockchain technology, we aim to increase efficiency and reduce risk in our own treasury operations,” Microsoft EVP and CFO Amy Hood said in a statement. “Businesses across the globe — including Microsoft — are undergoing digital transformation to grow, compete and be more agile, and we see significant potential for blockchain to drive this transformation.”
The businesses explained in their release that traditional trade finance involves manual, paper-based processes that are less secure and more time-consuming than digital and automated processes. Blockchain-based solutions for trade finance, they said, can help banks more adequately predict working capital flows, reduce risk, boost operational efficiency, heighten transparency for auditing purposes and more.
“The potential benefits of blockchain will help drive meaningful supply chain efficiencies to the clients of both Microsoft and the bank,” said BAML Head of Global Transaction Services Ather Williams in another statement. “This project is another example of our continued commitment to introduce financial innovations for the betterment of global commerce.”
Microsoft has pushed its Azure platform for blockchain solutions. Last year, the firm linked Azure to ConsenSys to develop a cloud-based blockchain platform that financial institutions could use to develop blockchain solutions and test them out. Earlier this year, Microsoft announced several new partners for its Azure tool for blockchain development, as well as new templates and categories for developers to operate in the space and develop their own distributed ledger-based solutions.